With a low corporate tax rate (12.5%) and English-speaking workforce, Ireland has been a popular destination for foreign investment. The country's Industrial Development Authority (IDA) has long been the envy of investment agencies worldwide for its ability to secure prized foreign direct investments, particularly greenfield investments by American IT and software giants like Dell,

Google and Intel which have long based their European operations in Ireland. Now the IDA is turning its focus to China, encouraging local corporations to use Ireland as a gateway to the EU market. Brian Conroy, who runs the IDA office here, says Ireland is learning how to pitch to Chinese investors. Because while investment project proposals coming in from USA end to be very neatly packagedthe typical Chinese investor seeks to edge into overseas markets via M&A or local partners.

Ireland has one of the most open and free markets in the EU.

Q: What areas or industries are you targeting in China?

A:ICT [information and telecom-munications technology] and software for example. Wee currently focused on Guangdong province, on Shenzhen, because that where most of those firms like Huawei and Foxconn are based. We have just appointed a trade representative down there. We target bigger companies because theye already done something in Europe and may want to go over. Many firms have sales in Europe but don have resources yet to establish there beyond one person rep offices. Thus we go after the big firms.

Q: Obviously there competition from other countries so what are the key attractions of Ireland for would-be Chinese investors?

A: Yes there are a lot of agencies after them. But our consistent R&D spending means there increased capability in ICT in Ireland. Wee also selling Ireland as a location for European headquarters, a control centre, or as a European base from a treasury point of view. This is the way US corporations have also tended to function in Ireland.

Q: What have the successes so far been?

A: Some of the Chinese investors into Ireland are in financial services, and aviation leasing. Bank of China for example has an aviation leasing business in Ireland. Then in the ICT sphere we have Satir, a game-developing firm doing localization of its products in Ireland. We also see interest in life sciences such as CIRS which tests Chinese exports to meet product safety regulations in the EU market. We have a few Chinese companies now, it takes time. This reflects where they are in terms of their development trajectory. While 21% of Chinese exports go to the EU only 2% of the country ODI goes to the EU. A lot of China ODI is going into energy but wee starting to see sales offices and small R&D operations being set up overseas. Chinese companies may not be doing it right now, but we expect to see this evolve more over the coming five years.

Q: Why is Ireland such a big player in aviation?

A: Ireland is a world centre for aviation, people forget that 50% of commercial planes worldwide are leased out of Dublin. There is a very specific set of deal-making skills involved here involving aircraft companies lawyers, banking, and a lot of those skills and expertise have been built up in Dublin over the past decades since pioneers like Tony Ryan [founder of Europe leading low fares airline Ryanair] saw the opportunities in the leasing area.

Q: What the break down (by geography, industry) of investors from Asia which have invested in Ireland?

A: The biggest country market is Japan from which 70% of our investment from Asia is coming, but remember wee had offices there for 30 years. China, India and Korea each represent about 10% of our investment from Asia. These figures will change. Wee had an office in China for only five years but we definitely see China and India rising in importance.

Q: What the difference in the kind of investment youe getting from India compared to China?

A: India is different, some of it is in M&A such as Ranbaxy, Wockhardt and Reliance [three Indian pharma companies] in the life sciences area. Ireland has a great reputation for life sciences. These firms see Ireland as having a great track record on compliance with the [US] Food and Drug Administration and EU standards for example and so do R&D and product testing in Ireland. India has expanded into Europe faster. But consolidation is happening fast in China and that will drive companies here overseas. Indian companies have also looked to Ireland as a good EU base for their BPO [Business Process Outsourcing] contracts. Ireland has a big pool of multilingual workers, for example of the 2000 workers at Google Ireland speak 40 languages and about 60% are non-Irish.

Q: How do you expect Chinese investment to evolve compared to the success youe had with US firms?

A: These Chinese companies have many western investment agencies chasing them. While the bulk of Chinese ODI [overseas direct investment] is in energy and resources a cluster of these companies do a decent business in Europe. Huawei has 15 people in Ireland servicing the local market. Theye risen so fast but still at evolutionary stage. There many more firms coming after them. But this won be a wave of greenfield investments like the US firms. Chinese firms have a different style, theye seeking M&A and local partners. Also these [Chinese] firms are hungry for technology. And Ireland has a great reputation in software, and in industry collaboration with universities.

Q: Do you expect Ireland to emerge as a base for Chinese Internet companies in the way it has for the likes of Google?

A: Firms like AliBaba and Taobao are growing so fast but theye concentrating on China, and then theyl look to Asia. Also theyl be going from a low cost to a high cost business environment. It tougher for Chinese firms going to Europe than it is for European companies coming to a low cost market like China.

Q: Are there examples of Asian Internet firms apart from Satir which are using Ireland as a European base?

A: Yes, a Japanese Internet gaming company called Gala does it localization in Dublin where it has 100 people.

Q: How come the corporate and political sphere in China seems very aware of Ireland strength in software?

A: It the exports of software [from Ireland to China]. Theyl have their homework done and will have looked at the trade figures and noticed when picking off the trade figures how much of Ireland trade to China is in software.

Q: The financial services sector is obviously a strength for Ireland, how will you appeal to China on that front?

A: The main four Chinese banks are going oversease have been developing relationships with them and expect business from them. But they do 95% of their business in China and that will change slowly. We see them coming to Ireland for funds administration, leasing and aviation leasing. We have a record of getting more business from investors once we get them into Ireland.

Q: Is the IDA and its reputation for attracting FDI into Ireland known in China among officials and businesspeople?

A: No, the awareness wouldn be the same as in the US or Europe. We are building our brand. But we are not seeking brand recognition through the mass market. We use the [Irish] ambassador and visiting ministers, that gives comfort factor to companies.

Q: Is the IDA well known in other Asian states I imagine nations like Singapore, Malaysia have studied your and Ireland success on FDI?

A: Singapore yes, wee well known there, over the years wee been tracking each other. Our local equivalent in Singapore, the EDB, has visited us and we visit them. We want to collaborate and with them as we have much in common and they are very strong in digital media for example. Investment goes to Singpaore [from China] because of the time zone and the common language.

Q: How have recent events the banking crisis and EU/IMF bailout - affected Ireland reputation among potential investors youe talking to in China?

A: It comes up in meetings. We deal with it matter of factly, explaining that it [banking crisis, real estate bubble] was to do with the Irish market and not our FDI. And we point out the positives, like falling costs of doing business. People take the information, in most cases they simply want to understand a bit more what happened.

Q: What the current status on the big Chinese exhibition centre project that been floated for Athlone [town in the centre of Ireland]?

A: It still live, the planning application will be lodged in the coming month. The investors, from Zheijiang were waiting till after the recent elections to lodge the planning application.

Q: How will this site differ from the Chinese commercial centres built in other European cities, which are effectively just wholesaling centres?

A: These would be exhibition halls to exhibit goods. Companies that currently exhibit in China could then do it in Europe, with European clients flying to Ireland to see the goods. The idea is to bring Chinese companies closer to the market.

Q: Why would they look at Ireland rather than continental Europe?

A: They looked at France and the Benelux and had looked at a site one hour from Paris but the lack of English speakers was a factor. They needed a certain parcel of land which was available in Athlone, and they felt the business environment in Ireland was conducive to make it work.

It little known that China owes much of the success of its economic model to Ireland. Back in the 1960s Ireland turned economic track by dropping tariffs and welcoming foreign investment particularly from the US with tax breaks and ready-built ree industrial zoneswhich offered concessions to foreign investors.

A 1978 delegation of Chinese officials led by then rising-star cadre by the name of Jiang Zemin was impressed by the free economic zone in Ireland to lure FDI, and the approach was quickly imitated in Shenzhen. The rest is history.

Ireland and China have shared something in common ever since: theye been favorite destinations for American overseas investment though Ireland has taken the high-end software and pharmaceutical investments and China the heavier manufacturing projects. While Ireland hopes Chinese corporations will follow the lead of earlier FDI inflows from North America and Western Europe, the Chinese entities are small players in terms of investment into Ireland.

Nonetheless some have made the move to the Emerald Isle. Low corporate tax and government transparency to foreign investors were the key draws for Hangzhou REACH Product Technic, a firm registering Chinese chemicals for compliance with the EU onerous REACH regulations on chemical product safety. Based in Hangzhou, two hours drive south from Shanghai, the firm is building an R&D and sales presence in its office in Dublin, explains managing director Jim Wei. The Chinese firm hires two dozen chemical engineers in Ireland to research and interpret the REACH regulations for the firm head office in Hangzhou.

Set up by two former staffers at China Inspection & Quarantine (CIQ), a government standards body, the firm chose Ireland for its can-do business attitude but not necessarily for wage costs. While theye slipped by 5% since the onset of the economic crisis, Irish salaries are on average six times those paid in China, points out Wei. ut the Industrial Development Authority (IDA) has been very helpful since we set up in Dublin

A mark of the firm satisfaction with its choice perhaps, the two meeting rooms in the CIQ base in the southeasterly city of Hangzhou are named after Irish cities: Dublin and Cork. Wei choice of location shows there are compelling reasons to invest in the Irish pharmaceutical sector. Data from Pharmachemical Ireland, a trade body, shows exports of pharmaceutical products rose by 7% in 2009 to EUR47 billion, dwarfing figures in this sector from larger economies, including China. Head of Pharmachemical Ireland, Matt Moran, points to his memberstrack record for quality can remember when we had a problem with the FDA [Food & Drug Administration] as proof of Ireland pool of talent and expertise for would-be investors in the sector.

Would-be foreign investors pointed by Irish officials towards the Science Foundation of Ireland which uses state funding to spur R&D in its 27 laboratories has focused on biotechnology, energy and ICT. Among the funded projects: a collaboration between Ireland national utility firm ESB and Japan Mitsubishi, on recharging solutions for electrical cars.

On the face of it Ireland trade with China is looking increasingly in favor of the west European island nation of five million. In 2010 Ireland shipped EUR2.5 billion to China, an increase of 10%. Chinese imports were down 7% - inevitable perhaps given Ireland economic crisis but in face more to do with Dell shifting operations to China, obviating the need to import components to its Irish operations.

MNC operations aside, education remains the key plank in Ireland trade with China according to Alan Buckley, who heads up the China office of Enterprise Ireland, the state body helping domestic Irish firms build global market share. While the numbers are comparatively small - Ireland issued 1,200 students visas to Chinese citizens in 2010, whereas Australia took in 100,000 Chinese students in the same year those figures will continue to rise, explains Buckley. While Irish classroom space for foreign students is ultimately limited, Chinese students make up the country second largest non-EU foreign student population, after the US. Irish universities (14 of whom have offices in China) are also keen on research collaborations with Chinese counterparts, adds Buckley.

Aside from education Buckley sees Chinese interest in Irish medical devices and financial services sectors. Finance-focused firms Monex and Norkom have grown healthy business with Chinese banks for their foreign exchange and security software solutions respectively. Buckley is also keen that Ireland becomes a base for Chinese financial institutions: Bank of China has an office in Dublin Financial Services Centre to run its European aircraft leasing business.

Funds

Though Chinese overseas money flows remain restricted while the country keeps its capital account closed, Ireland hasn joined the fight for offshore Chinese money. Chinese firms who then reinvest back into China as oreign Direct Investmentamong low-tax havens like British Virgin Islands and Mauritius.

Favored by western multinationals as a headquarters due to its 12.5% tax rate, Ireland may find its fellow EU member Malta has already gone after the Chinese offshore market. Malta is claiming a 40% discount on Western European costs of doing business and while the corporate tax rate is 35% (compared to Ireland 12.5%) companies can claim most of it back goes the line being spun in advertorials in the Chinese business press.

Brendan Waldron, head of Asian New Tigers, the Shanghai-based business consultancy advising Irish firms investing in China has yet to see significant traffic in the opposite direction. e haven had any specific interest for investment in Ireland but wee spoken to Chinese companies about using Ireland as a base for their European set up. This is an area that is likely to grow more and more. Wee worked with Ernst &Young and KPMG as well as the IFSC [Dublin International Financial Services Centre] in promoting Ireland, but it a case of ut of sight, out of mind as there is no real presence here promoting the country in that way.

Given its current predicament Ireland would surely like some largesse from China, which has been promising big-cash injections to EU struggling economies like Greece and Spain the latter has been touted by China Premier Wen Jiabao as China best friend in the EU.

Clearly Ireland has its attractions, but given the competition for Chinese money, Ireland will have to shift more resources, still concentrated on US corporate world, to the East. Waldron, who also chairs the Ireland China Chamber of Commerce, says Ireland lacks the resources to promote itself effectively in China. uropean countries have invested heavily, with a large well resourced presence here working with their governments in promoting their country. Wee got the IDA [Industrial Development Authority, see separate Q&A] working hard, but they are on their own./p>

Ireland predicament

Though it boasts a lively export sector, a skilled workforce and 12.5% corporation tax rate Ireland has found itself at the eye of the storm over Euro zone debt worries. While similarly stressed Greece and Portugal have foundered on huge state debt the Irish crisis came about from the country bailing out its banks, who recklessly borrowed from international markets to fund a decade-long real estate bubble which burst when the world financial markets tanked in 2008 in the wake of Lehman Brotherscollapse. Ireland is savagely cutting state spending to finance the EUR100 billion bank bailout - which cuts cash needed to stimulate the economy back to health while also dealing with unemployment that soared with the collapse of a construction sector that once employed a fifth of the labor force, along with many immigrant workers. Ireland is expected to return .8% GDP growth in 2011, a long way from the 10% posted in 1996 when its successful attraction of FDI, low inflation and political stability led to it being dubbed Europe Celtic Tiger economy.